Federal cabinet minister Peter Penashue says a federal loan guarantee for the $6.2-billion Muskrat Falls hydroelectric project in Labrador could be finalized by the end of the summer.

The loan guarantee wasn't mentioned in the federal budget on Monday but the election promise to help Newfoundland and Labrador reduce its borrowing costs as it moves ahead with the project, was repeated in last week's federal throne speech.

"I certainly hope it will be done before the [provincial] election because I think that for the province, it's very important. It's very important for Labrador," said Penashue, the Member of Parliament for the federal riding of Labrador, on Tuesday.

"There are a lot of jobs riding on that project and the prime minister made a commitment for the loan guarantee. It's there."

Penashue said there were high-level meetings on the Muskrat Falls issue last week.

The Lower Churchill project will face another hurdle later this summer when the Innu Nation puts the New Dawn agreement to a referendum of its members.

Penashue said Tuesday that he is confident it will pass.

Loan guarantee promised during federal election

On March 31, Stephen Harper said a re-elected Conservative government would guarantee a loan for Lower Churchill hydroelectric project.

The Conservative leader, however, said the project must meet three conditions: It must have national or regional importance, it must have economic and financial merit, and it must significantly reduce greenhouse gases.

Two provinces signed deal

In November the premiers of Newfoundland and Labrador and Nova Scotia announced a deal to develop the Lower Churchill hydroelectric project.

Danny Williams and  Darrell Dexter agreed on a 35-year partnership involving Nalcor, Newfoundland and Labrador's Crown-owned energy corporation, and Halifax-based Emera Inc., parent company of Nova Scotia Power.

At its peak, about 2,700 people are expected to work on the project, which is scheduled to deliver first power by 2016. The deal  allows Nalcor to generate energy for Newfoundland and sell surplus energy to new markets, and provides a consistent source of energy to Emera, which already has commercial stakes in the Maritimes and the northeastern U.S.

Both parties stand to profit from potential sales to other markets.

The deal will see a 824-megawatt power plant built at Muskrat Falls in central Labrador, with a supply of about 4.9 terawatt hours per year.

Emera will receive about 20 per cent of that energy for itself and in return is paying for the construction of the underwater link. Newfoundland and Labrador, which is reserving 40 per cent of the power for its own use, will raise $4.4 billion to pay for its share.